When an independent auditor recently examined the finances of the city of Box Elder, the firm found far more than the typical missing receipt or department that needed better oversight.
Rather, the auditor found a financial system nearly in complete disarray. Not only is the city operating at a general fund deficit of up to $500,000, it has poor bookkeeping, improperly intermingles city funds, does not have staff trained to adequately handle a budget and is violating state law by not drafting an annual spending plan or filing a required annual financial review for four years in a row, the audit said.
And yet, the financial mismanagement is only one of the issues facing Box Elder, a city of about 8,000 people located east of Rapid City that is the home of Ellsworth Air Force Base.
A Journal review of the audit and internal city documents, as well as interviews with top officials, shows that much is amiss in Box Elder, a situation made worse by a pattern of poor leadership and an unwillingness for anyone in authority to accept accountability for the ongoing issues.
So, as Box Elder residents cast ballots Tuesday for two city council seats, they’ll have plenty to consider.
The Journal review has found that:
• The city took on large projects like building a wastewater treatment plant and a new City Hall without a plan to pay for them.
• The city has a long track record of financial mismanagement, so much so that there may not be money to pay for basic city services when a sewer plant comes online in 2014.
• The architect who designed the new combined government building has warned that the construction was faulty and that employee safety may be compromised. When the issues arose, the architect said in a letter that former Mayor Al Dial, who oversaw the construction of the building, would not respond.
• The former police chief was allowed to quietly resign and look for new jobs as chief despite numerous complaints of harassment or improper behavior in Box Elder and at his previous two agencies.
• Allegations of harassment have been filed against incumbent Mayor Bill Griffiths, who was recently asked by two council members to resign.
• Public meetings have become mired in drama, including last week when Dial pulled out a video camera to tape responses Griffiths gave during the meeting.
Here is a deeper look at some of the issues facing Box Elder.
In his first state-of-the-city address last week, Griffiths publicly announced some of the grim news about Box Elder’s financial burdens. Standing before half a dozen residents in the city’s senior center, Griffiths said that for at least the past five years, the city has used money from two city funds — the water fund and the sewer fund — to cover losses in the general fund. The general fund pays for things like police, streets, libraries and parks.
During that time, the general fund has been operating at a loss of between $350,000 and $500,000, according to Griffiths and audit reports. The problem is this: When the new sewer facility comes online in the spring of 2014, the city will have to spend $90,000 per month from its sewer fund to pay for its construction and maintenance of the facility. That means the sewer fund will no longer be able to cover those losses.
An audit released in February showed the extent of the city’s financial troubles going back to the years 2009 and 2010.
The audit, conducted by Casey Peterson & Associates, Ltd., reveals that the city of Box Elder made numerous accounting errors.
Among them: The city does not charge sufficient fees to cover its water service, resulting in deficits in that government fund; does not have reserve accounts as required under one debt agreement; does not reconcile its accounts in a timely manner or review them properly; improperly intermingles city funds; lacks adequate controls to monitor loans; city staff lacks a necessary understanding in accounting.
The audit also said the Box Elder City Council does not draft a budget on a yearly basis as required by state law.
“The errors are related to a lack of reconciliation of accounting records … and a lack of oversight of the accounting function of the city,” according to the report.
Neither Griffiths nor former Mayor Al Dial — who is running for a city council seat in Tuesday’s election — seem to accept the severity of the city’s financial troubles.
Griffiths told the Journal that the city has still not separated its different operating funds and attributed the problem to a "lack of sales tax revenues." At the state of the city address, Griffiths said his solution to make up the $500,000 annual general fund deficit would be to lure more businesses to Box Elder. He also proposed an ordinance to create a reserve account to designate money that would pay for the sewer facility.
Griffiths' stated plan: lure businesses such as Taco Johns, KFC, McDonald’s and other restaurants to Box Elder. Griffiths said the city has talked to each of those companies and that drawing them to Box Elder would mean more sales-tax revenue.
But in order to raise that much money, the city would need to earn more than 50 percent of what it currently receives in sales taxes. In 2010, the city earned $811,105 in sales and use taxes, according to the audit.
When asked about the audit, Dial suggested the problems were merely a matter of not having expenses and revenue properly coded when they are recorded.
When asked whether he was familiar with the audit, Council President Mark Coatney said he had not yet fully read it.
All told, the new sewer plant and the combined city building that opened last year will cost the city $1.25 million annually in the coming years, according to Griffiths.
Not only are the city of Box Elder’s finances flawed, sometimes they aren’t reported at all, according to the state Department of Legislative Audit.
South Dakota cities are supposed to file annual financial reports with the state. But Box Elder did not provide any reports between 2008 and 2012, according to Marty Guindon, auditor general with the department.
“Not having submitted for five years is uncommon,” Guindon said. The state sends letters notifying Box Elder when it passes its due date each year, Guindon added.
The city has also been slow to conduct full financial audits, which it can perform either annually or every other year. Audits are performed by an independent accounting firm and serve to double-check a city’s math and to make sure it is following all the laws.
The audit for 2011 and 2012 is being completed and will be sent to the state in June, according to Griffiths.
Accounting problems and reporting delays are not the only troubles the city of Box Elder has had with tracking money. It took the city an extra year to get reimbursed $40,000 in federal grant money because it couldn’t show how it had spent the money.
Randy Kittle, a grants coordinator with the state Division of Parks and Recreation, mailed out a copy of the reimbursement form to the city finance director in August 2011, according to documents obtained by the Journal.
Nearly eight months later — after numerous calls and emails from Kittle, according to the documents — the city responded. But the records it sent in May 2012 did not properly document how staff time and city equipment was spent on the project, according to the documents.
Even when he was given more detailed records in August, “The invoices for materials appear to be of general city use with handwritten notes being made on some of the invoices [like] ‘shop’ and 'H20’,” according to a record of correspondence by Kittle to Griffiths that was obtained by the Journal.
The requirements weren’t worked through until the end of the year. Kittle told the Journal the grant money was sent in December. When asked whether a problem like this was common among cities receiving grants, Kittle said it was not.
Even the city’s multi-purpose building, a fresh-looking government edifice situated east of Ellsworth Air Force Base, has endured scrutiny.
The building — which houses the police department, city government offices and an event center — is intended to anchor a yet-to-exist downtown. But it has come under criticism from the architecture firm that designed it, according to documents obtained by the Journal. A letter to Griffiths last June from the ARC International asserts that the building contains numerous code violations. The letter, which takes aim at construction materials obtained by the city for the project, cites several problems.
For starters, it says the police department main entrance is “equipped with substandard hardware that jeopardizes life safety egress during panic conditions.” Also, the “owner-provided doors have low quality hardware that would not be recommended for a commercial” building. The owner-provided windows also are not insulated and the city will “experience energy loss.”
Because the standards do not meet the architect’s standards, “the existing construction does not meet state statute which requires public buildings to be designed under the responsibility of a licensed architect,” the letter continues.
“I spent many hours over several months attempting to convince [former Mayor Al Dial] that these concerns be addressed,” wrote Donovan Broberg of Architecture International. ”I exhausted all options appropriate to my profession during the course of construction … all to no avail.”
Dial — the city’s mayor for most of the project’s conception, and who was paid $5,000 to manage the project after he left office — said that the city had a phone conference with International Code Council officials who agreed that the issues were not code violations.
“This has been gone over 15 times,” Dial said.
Griffiths, who said he has not taken any action to address the concerns, said they do concern him. After his state of the city speech, Griffiths fished out of his pocket a pair of keys with no teeth that had stenciled on them what looked to be a company name, “Mingbang.”
“The keys are really weird, and we can’t get no keys because the company went out of business,” Griffiths said. “So we don’t have keys for all the doors.”
When he was sworn in as mayor last May, Griffiths took some bold actions, like relieving Police Chief Timothy Ryan and Finance Officer Debbie Knapp of their positions. When Council President Mark Coatney asked Griffiths in February to resign, he cited a lack of consultation on those personnel decisions as one reason he wanted to see Griffiths gone. But allegations of personal misconduct against Griffiths were reportedly made around that time too, according to one council member.
The allegations were addressed in a Feb. 5 council meeting in executive session, after which Griffiths was asked to resign, said Council Vice President Terry Wenrick. Then, in a March 19 executive session, the city council discussed an investigator’s findings on the two complaints of harassment, according to Wenrick. One of those complaints was related to possible sexual harassment, he said.
Wenrick declined to name the employees involved or give specifics, but he said city employee working conditions have not been good in Box Elder.
“If they could afford not to work here, they’d be quitting,” Wenrick said of city employees.
The Journal last Wednesday requested an audio transcript of the meeting where the findings were reportedly delivered at the end of the night. The city of Box Elder, however, has not yet handed over the transcripts. Griffiths declined to comment on the allegations, adding, “There’s nothing on harassment.”
Another council member, Steven Cowley, said the issues are being resolved.
“It's troubling to have any complaint, but I think the items are being worked through. … It happened and we're moving forward,” said Cowley, who is up for election Tuesday for his first full term.
Tension at meeting
At the council’s April 2 meeting, Wenrick came out swinging. The councilman demanded that a council statement made after the March 19 executive session regarding the harassment allegations against Griffiths be printed in the public minutes. Those decisions, Wenrick said later, were the results of an investigation into the harassment complaints.
Wenrick sounded openly hostile when speaking to Griffiths and rolled his eyes whenever the mayor spoke.
Dial sat in the audience and would comment on the discussion, frequently to disagree with the mayor or clarify a discussion topic. Sometimes Griffiths would even call on Dial to help answer a question about a past issue, like city fees for records requests. Toward the end of the meeting — before Wenrick confronted Griffiths on whether he passed documents to the Journal regarding the departure of former chief Ryan — Dial set a small video recorder on the bench to catch Griffith’s response. Griffiths denied that he gave the paper the documents.
Al LaBine sat in the meeting, too. The former councilman, who is running for a seat in Tuesday’s election, commended the Box Elder Police Department for helping a lady get in her locked car. LaBine told the Journal he is unaware of the financial difficulties facing the city. But he notices the “the tension” aimed at Griffiths by some council members and said he doesn’t know what’s going on behind closed doors.
Said LaBine: "There's only so much that gets spoke of at the city meetings.”